Expanding the motherboard market: Q&A with Gigabyte sales and marketing

Ricky Morris, DIGITIMES, Taipei [Tuesday 5 June 2012]

Following the recent launch of Intel's new Ivy Bridge platform, new announcements from AMD, and the growing anticipation for Windows 8, Computex 2012 will provide PC players from every segment an opportunity to showcase their hottest products planned for the second half of the year.

Q: What are the hot motherboard products Gigabyte will be showcasing at Computex 2012?

Colin: We're launching a couple of refreshes; one of those is our Ultra Durable technology. We're launching Ultra Durable 5 which is going to be a part of a new range of X79 and Z77 series products. Briefly with Ultra Durable 5 we're now using high-current components, in particular a new MOSFET from IR that is capable of handling up to 60 amps of power. We'll also have the 2oz copper PCB that we've been using for some time, as well as 60A chokes.

We're refreshing some X79 and Z77 boards which will have these new features, which means we're looking at much lower temperatures, much more stable operating and increased lifespan, and higher margin for overclocking because we can put more power into the system. There's still less heat than before, so more room to overclock.

We're going to feature Thunderbolt on some for those new boards as well. We'll be doing some interesting demos of that at Computex; for example being able to use a single Thunderbolt connector for connection to many different devices. We're going to show a RAID system from Promise, it's a pretty elaborate setup, it's going to be connected to several different monitors, and also be doing real-time editing on another device that's hooked up too, and it's all daisy-chained off a Thunderbolt cable. We're trying to show that Thunderbolt is definitely a product for the workstation, if you're doing a lot of video editing, if you're doing something where you need a lot of storage, Thunderbolt is a very good option.

Along with our X79 refresh were also going to add SAS onto the motherboard as well. So for X79, we've got SAS and the new Ultra Durable 5 technology, so we're positioning it for a workstation desktop system. All of these boards are going to launch at Computex, so availability will be around that time.

On the AMD side we'll have new FM2 socket products, we'll have some boards we showed a month ago at the Trinity event which they had in the US. We built the demo boards for them, but Computex is going to be our first live public display of FM2.

Q: Will these boards you've just discussed be launched as version 2 models of existing products, with the specs they have now plus these new features, or will they be positioned as new products added to your range alongside models already on the market?

Colin: They with have similar feature sets, but there will also be a couple of differences: we've changed the naming scheme so these models will be UP for "Power" instead of UD, and the Thunderbolt boards will have a TH at the end to designate that, and SAS will be S. Basically what we're trying to do is not eat away at the market share we currently have. Obviously adding these new features is going to be more expensive so we're trying to address different segments that we're not reaching now. We'll have our traditional models currently, and these new products will slot between those models.

Raymond: One of the key things about our Thunderbolt is that we are using the Intel 2-port SKU, compared to the solution you see on the MacBook, that's only 1-port. That's Intel's recommended configuration, and that's what we have seen our competitors are using too.

We started to work with the 2-port solution about six months ago and we did all the validation on that chip ourselves. You cannot sell a motherboard with the Thunderbolt logo without certification from Intel's lab in Israel, and we believe that we are in the closing stages of the certification process now.

Q: What are your expectations for Thunderbolt initially, will it take off alongside USB 3.0, or will it remain a niche technology only for the very high-end market?

Raymond: In terms of extreme performance Thunderbolt is the only solution because it provides 10Gbps on each line. But besides those extreme users, USB 3.0 is enough. Additionally there's the cost to consider, the cost of the chip itself, and the cable is expensive, at least US$40, so I think, for the time being, Thunderbolt will act mainly as a technology demonstration for Intel and its partners until costs can be brought down.

Colin: That's why, especially at first, we are positioning Thunderbolt as the workstation story. For example if you are doing video editing, in that situation having Thunderbolt really does make a difference.

Q: What will be the main benefits of adding SAS to the boards?

Colin: SAS is again part of the workstation story and so initially we expect it to be a niche appeal. With these new boards we are using a server chipset, and we are validating our boards using some of the server CPUs as well.

The whole idea is to create the ultimate workstation, so in terms of SAS there's a niche crowd where the extra stability and performance of SAS definitely appeal.

In terms of widespread adoption, we don't know what to expect yet, SAS is something new in the DIY industry and it is going to take some time to educate the market about SAS, and then there's issues about consumers being able to find SAS drives, as well as seeing prices come down to acceptable levels. But saying that, we showed our first X79 boards off at IDF last fall when they still had the SAS ports, and a lot of people complained about SAS being taken off the production boards, so I think there is already a group of people that want SAS right now.

Q: It seems you are targeting some of these new products at customers looking to build their own workstation. Does such a market even exist, and what is your estimated size of that market and how does it compare to the overall workstation segment?

Claude: In the past there has been a small market for workstation motherboards, but I think there is an opportunity for high-end motherboard vendors like Gigabyte to enter the market by offering users the ability to replace the boards in their existing workstations.

But still there are issues, and there are many factors that will influence a buying decision, so I think right now we are only at the beginning. We don't expect too much in terms of shipments, only a few 10s of thousands of units initially. Our aim for now is to extend the high-end motherboard business to new areas that we haven't touched in the past.

This is our first step into the workstation ecosystem so our targets for this year are to educate the market and to get end-user feedback.

Q: How was 2011 for Gigabyte in terms of sales? Did you meet your targets?

Claude: I think we could take a short overview of last year: In the first quarterwe launched our 6-series motherboards, but then there was the issue with the B2 stepping chipset recall by Intel. But despite the setback, the products maintained momentum because it was a brand new socket and new CPUs, so the first half was quite positive. In the second-half, there was the hard disk shortages, so the second half was flat compared to the first.

Overall, I think our business was OK, but not as good as we were looking for. The first half started off well and we were expecting to do even better in the second half.

Our shipments for the year were around 18 million.

Colin: The own brand retail motherboard market didn't really grow in 2011 largely due to the hard drive shortages. This shortage is easing now and we are seeing a healthy uptake of our new 7-series motherboards together with some of the older models that are expected to sell into 2013. Overall we expect the recovery in 2012 to balance out the effects of the HDD shortage in 2011.

Q: Can you go into more details about your outlook for 2012?

Claude: We started off well this year in the first quarter so we are expecting to post good results especially since the issues with hard drives have been resolved. But there is still bad news for the economy, for example in Europe, and even the Middle East. There are some concerns about that. We are expecting to see around 10% growth this year, but it all ultimately depends on those issues, and that we don't see any other major problems like the hard drive one last year.

Q: A growth forecast of 10% puts your target shipments for the year only around 19 million. That's quite conservative compared to targets you've given around this time of year in the past. Why is that? Do you not expect Windows 8 to boost the market in the second half?

Claude: I think it's hard to say that Windows 8 will impact the PC market, especially for the desktop. For notebooks or for tablets, Windows 8 is quite positive, but in general for the DIY and system integrator market there will be a learning curve, so it is hard to say if the effect of the new OS will be positive or negative.

Raymond: From the engineering side, Windows 8 has impacted us a lot. There are new logo requirements, and we have already been working for many months to make the necessary hardware and software changes for that. In terms of features Windows 8 provides a better user experience, systems will be required to boot faster for example. This has presented us with several challenges, but for me personally I enjoy facing those challenges and finding solutions which benefit our customers.

Q: How does your growth target stack up to the motherboard industry as a whole for 2012?

Claude: Over the past few years the motherboard market has maintained at around 5-7% annual growth. That's the reason I said 10% earlier, because when you consider the natural growth in the market, we still expect to gain market share due to consolidation in the ecosystem.

Q: Many of your new products are targeting new market segments. Is that a response to the feeling that perhaps the PC market has moved on from large, powerful desktops to small, energy efficient devices like ultrabooks and tablet PC?

Colin: From our business standpoint we don't agree with the often quoted claim that desktops are on their way out. Just a couple of years ago we saw netbooks hit the market and people were saying that was the end of the desktop. Everyone was calling out doom and gloom for desktops.

Where are netbooks now?

We see tablets as eating away at the bottom of the market for notebooks, not motherboards. People who have a tablet device still need a desktop, they need that connectivity even if the desktop is at home, and we're seeing a lot more cloud services that let your desktop service all of your other connected devices. We are looking at tablets as additive to our market, and we definitely see tablets and desktops coexisting in the market.

Raymond: Actually what I believe we are seeing internally in terms of sales is an increase in our high-end models, and one of the reasons for this is tablets, because users need a reliable desktop at home.

Claude: Also I think that while the big OEMs are off chasing mobile devices like tablets, this has caused them to reduce their investment in desktop PCs. The big OEMs have given up the desktop market, so that gives space for the DIY market to grow, as well as creating opportunities for smaller system integrators to step in and deliver unique solutions for their local market. Both of these increase demand for our products.

Raymond: One example of this is a new business that only emerged in the past few years. When Intel released Sandy Bridge they left a lot of overclocking headroom on the CPU. But nothing is free, you have to search through batches to find the best chips, you need to find the right components such as the cooling system and fans, and you need to spend time to fine-tune the BIOS settings to get the best performance.

So there are a few specialist system integrators, for example in the UK and Germany, who have seized that opportunity and are doing all that work for their customers providing very high-end default overclocked systems. This is a new type of business, and one that is not possible for notebooks or tablet PCs.

Colin: We get a lot of positive feedback from system integrators and individuals running small scale operations. Essentially what has happened is that there is a group of customers who have been putting together their own systems for 10 to 15 years, but they now have more responsibility and a so lot less free time, which means they can't spend weeks reading reviews, posting on forums, and researching every last component for their next PC. But at the same time they don't want an off-the-shelf system from a big name vendor, so they are turning to local shops saying, "Here is my budget. This is what I want. Build me the best system you can in that price range."

Q: How is your market share distributed around the world, what are your main markets?

Claude: China, Europe and APAC are our main markets. China accounts for around 40%, Europe 25-30%, and APAC 20%, and the US and the rest around 10%.

Q: 40% in China is surprisingly high, how fast is the China market growing?

Claude: I think year-over-year the figure is more than 10% growth, but it could be even higher.

Raymond: China has lots of opportunity for growth. Currently, we at Gigabyte have a very large sales team in China, but still we cannot cover most of the cities. We just cover the tier-one cities, and some of the second-tier. We leave it to sales reps to handle the third-tier and lower cities, which means that if we wanted to, if we invest in more sales people and more technical support staff, there is a lot more potential we can explore in the market.

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